Labor & Employment Committee: Employee Background Check Requirements

May 12 2015 | Committees

Recent lawsuits and settlements highlight the risk for employers who ignore the requirements of the Fair Credit Reporting Act (“FCRA”) when conducting employee background checks. Written disclosure of the background check must be given separate from the employment application and a written authorization must be obtained before running the background check. While a direct reference from an employer who had firsthand knowledge of the applicant would not constitute a consumer report under the FCRA, a report from an agency that is in the business of gathering information for the report would qualify under the FCRA.

The FCRA mandates notification if a background check is the basis, in whole or in part, for denying employment. This means that if there is anything in the background check that makes you look at other candidates, the rejected applicant must be so informed. Before taking adverse action, you must send or give the applicant/employee: 1) a copy of the consumer report received from the consumer reporting agency; and 2) a copy of the Summary of Rights published by the Federal Trade Commission (“FTC”).

If you decide to deny employment or terminate, then you must furnish in writing to the individual: 1) the name, address, and phone number of the investigative agency; 2) a statement that the agency was not the decision maker and is unable to explain why the adverse action was taken; 3) a statement setting forth the employee’s right to gain a free disclosure of his/her file from the agency if requested within 60 days; and 4) a statement setting forth the employee’s right to dispute directly with the agency the accuracy or completeness of the agency’s  information. You should give the individual approximately five (5) days to respond.


A discount retailer recently paid over $4 million to resolve claims that it denied employment to applicants before they received the required notices, and a transportation company recently paid $4.4 million to resolve a class complaint arising over its failure to obtain authorizations from online applicants before running criminal background checks.

A large retailer and a nationwide business solutions provider are currently in litigation because the criminal background checks they received were not provided to unsuccessful applicants prior to their rejection. Also, some of the criminal background checks were inaccurate, stale and/or involved mistaken identity.

Every employer should audit its background check practices. This is not a law to be taken lightly.



About the Author: A partner and practice group leader of Jones Walker's Labor & Employment Practice Group, Sid Lewis consults and advises management and human resources personnel with respect to employment and labor laws in all industries throughout the United States, including retail, hospitality, healthcare, manufacturing, and service industries. 

Mr. Lewis has successfully defended hundreds of state and federal lawsuits involving federal and state employment claims. He regularly handles Equal Employment Opportunity Commission and National Labor Relations Board charges on behalf of employers.

Mr. Lewis is a two-time recipient of the Individual Citation Award given by the International Association of Personnel in Employment Security, Louisiana Chapter, and a frequent speaker and moderator for personnel associations and trade groups throughout the Southeast. He is currently Chairman of the Labor and Employment Committee for the New Orleans Bar Association. 


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